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International Exits

Over the last 18 months MBM has been involved in a number of exits which have allowed founders, investors and employees to benefit from years of hard work by selling their shareholdings to new owners, who will take the business on to the next stage in its development.

Many of these deals have involved international aspects.  In some cases, businesses have been sold to foreign trade buyers and in others, businesses with operations across a number of countries have been sold to venture capitalists as part of a global buy and build strategy.

No two deals are the same but this recent concentration of experience does let us highlight some common themes and practical issues which may benefit other potential sellers.

Choice of law – If buyers, sellers and operations are based in various countries, UK sellers should ensure that the law governing the sale is UK law.  While Scots law may not be readily acceptable to all, English law is usually an acceptable compromise.  Following on from this, any appointed advisers need to have sufficient experience of working within those laws and transactional conventions.

Understand tax position early on – Issues arising from taxation can have an impact in many ways.  Whether this relates to a foreign subsidiary’s compliance with local tax laws, the taxation of a founder’s shareholding and his family’s interest, or the tax treatment that is applied on the exercise of employee share options, these kind of considerations can result in substantial amounts of money being required to be accounted for in a way that any Terms Sheet could not anticipate.

Foreign management teams – Ensure that the local management teams of foreign subsidiaries are sufficiently involved in the process so that they can effectively disclose any local issues which the main UK board may not be aware of.  Commercial disputes in foreign jurisdictions may often be handled by local offices and buyers may become nervous if these are highlighted late on.  Distance can also amplify concerns, as unfamiliar laws and individuals can mean there is not the same ability to put disputes in context and avoid unnecessary alarm.

Group banking arrangements – Finance directors of any target will need to ensure they are completely familiar with all bank facilities, both in the UK and abroad.  If the buyer is to arrange new group banking facilities, local advisers may need to be appointed to deal with the discharge of bank securities in other jurisdictions.

Foreign buyers – If the selling shareholders or management team are to have shares or management positions in a non-UK group, it will be important for them to understand the key aspects of how their foreign shareholdings are administered and how the international management structure is to operate.  

For further information please contact Kenny Mumford on 0131 226 8205 or email kenny.mumford@mbmcommercial.co.uk

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